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Contractor Wrap-Up Program

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Title: Contractor Wrap-Up Program Author: URS Last modified by: Jake Created Date: 3/27/2008 10:32:38 PM Document presentation format: On-screen Show – PowerPoint PPT presentation

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Title: Contractor Wrap-Up Program


1
Motiva Enterprises LLCPort Arthur Expansion
Project
Team C Jacob Munoz Aaron Hebert Joseph Nasser
2
Outline
  • Motiva Overview
  • Expansion Highlights
  • Insurance Programs
  • Contractor Wrap-Up
  • Contractors Equipment Floater
  • Builders Risk
  • Marine Cargo

3
Motiva Overview
  • Formed in 1998
  • Dual ownership between Shell and Saudi Aramco
  • Number of Employees Approximately 2,900
  • Revenues 31.1 billion (YE 2006) (85M a day)
  • Terminals 42
  • Motiva owned stations 1,128
  • Wholesale owned stations 7,011
  • Crude Throughput Capacity (Daily) 745,000 BPD
  • Crude Actual Avg. Daily Throughput 704,000 BPD
    (Average 95 of max capacity)

4
Motiva Operations
  • Commercial Fuels
  • Distribution
  • Retail
  • Refining
  • Convent Refinery- 235,000 BPD
  • Norco Refinery 220,000 BPD
  • Port Arthur Refinery 285,000 BPD

5
Refinery Expansion Highlights
  • 325,000 barrels/day capacity
  • Lower emissions
  • Increase US Supply
  • 4,500 construction jobs and at least 300 new
    full-time jobs
  • Cost
  • 7,000,000,000

6
Cautionary Statement
  • The following presentation includes
    forward-looking and backward-looking statements
    within the meaning of Section 27A of the
    Securities Act of 1933, as amended, and Section
    21E of the Securities Exchange Act of 1934, as
    amended, which are intended to be covered by the
    safe harbors created thereby. You can identify
    our forward-looking statements by words such as
    anticipates, expects, intends, plans,
    projects, believes, estimates, and similar
    expressions. Forward-looking statements relating
    to Team C observations on Motiva are based on our
    research and knowledge from Dr. Dan Jones class.
    It includes generalized information about the
    petroleum industry in general on the date the
    presentations are given. These statements are
    not guarantees of future performance and involve
    certain risks, uncertainties and assumptions that
    are difficult to predict. Further, certain
    forward-looking statements are based upon
    assumptions as to future events that may not
    prove to be accurate. Therefore, actual outcomes
    and results may differ materially from what is
    expressed or forecast in such forward-looking
    statements.
  • Factors that could cause actual results or events
    to differ materially include, but are not limited
    to, crude oil and natural gas prices refining
    and marketing margins potential failure to
    achieve, and potential delays in achieving
    expected reserves or production levels from
    existing and future oil and gas development
    projects due to operating hazards, drilling
    risks, and the inherent uncertainties in
    interpreting engineering data relating to
    underground accumulations of oil and gas
    unsuccessful exploratory drilling activities
    lack of exploration success potential disruption
    or unexpected technical difficulties in
    developing new products and manufacturing
    processes potential failure of new products to
    achieve acceptance in the market unexpected cost
    increases or technical difficulties in
    constructing or modifying company manufacturing
    or refining facilities unexpected difficulties
    in manufacturing, transporting or refining
    synthetic crude oil international monetary
    conditions and exchange controls potential
    liability for remedial actions under existing or
    future environmental regulations potential
    liability resulting from pending or future
    litigation general domestic and international
    economic and political conditions, as well as
    changes in tax and other laws applicable to Team
    C. Other factors that could cause actual results
    to differ materially from those described in the
    forward-looking statements include other
    economic, business, competitive and/or regulatory
    factors affecting Team C generally as set forth
    in the class syllabus. Team C is under no
    obligation (and expressly disclaims any such
    obligation) to update or alter its
    forward-looking statements, whether as a result
    of new information, future events or otherwise.
  • Cautionary Note to U.S. Investors The U.S.
    Securities and Exchange Commission permits oil
    and gas companies, in their filings with the SEC,
    to disclose only proved reserves that a company
    has demonstrated by actual production or
    conclusive formation tests to be economically and
    legally producible under existing economic and
    operating conditions. We use certain terms in
    this presentation such as oil/gas resources,
    Syncrude, and/or Society of Petroleum
    Engineers (SPE) proved reserves that the SECs
    guidelines strictly prohibit us from including in
    filings with the SEC. U.S. investors are urged
    to consider closely the oil and gas disclosures
    in our Form 10-K for the year ended December 31,
    2004.
  • This presentation includes certain non-GAAP
    financial measures, as indicated. Such non-GAAP
    measures are intended to supplement, not
    substitute for, comparable GAAP measures.
    Investors are urged to consider closely the GAAP
    reconciliation tables provided in the
    presentation Appendix.

7
Motiva Port Arthur
  • Port Arthur Refinery (PAR)
  • Built in 1903 as Texacos first refinery
  • Capacity of 285k BBOPD
  • 900 employees with payroll of 150,000,000
  • Port Arthur and Port Neches terminals serve 700
    vessels per annum
  • Historic asides
  • Wood storage tanks and pipes
  • WWII Fuel for Cash program
  • Donkey transportation
  • Admin building shaped like a T

8
Contractor Wrap-Up Program
  • Traditional insurance project owners,
    contractors and subs purchase insurance
    independently.
  • Wrap-up insurance project owner covers all
    parties owner, contruction manager, general
    contractor, and subs
  • Popular on large construction projects
  • Cost savings

9
Contractor Wrap-Up Program
  • Advantages
  • Savings from buying insurance in bulk
  • Eliminating duplication in coverage
  • Handling claims more efficiently
  • Reducing potential litigation
  • Enhancing workplace safety
  • Save up to 50 vs. traditional insurance
  • Save up to 1 to 3 of projects construction cost
  • Cost savings realized from centralized safety
    programs.

10
Contractor Wrap-Up Program
  • Disadvantages
  • Requires project owners to invest more time and
    resources in admin
  • Project owners must hire additional personnel or
    pay to contract out mgmt of wrap-up insurance.
  • Large premiums at beginning of project

11
Contractor Wrap-Up Program
  • Barriers
  • State systems for workers compensation can
    prevent wrap-up insurance in some states by
    reducing cost savings.
  • North Dakota, Ohio, Washington, West Virginia,
    Wyoming
  • Project must be large or have high labor costs to
    make wrap-up insurance financially viable.
  • Reduces contractors profits from insurance
    rebates.
  • ¾ of Total Ins. Cost on construction is for
    workers comp. Removing it from owners control
    eliminates the cost savings of wrap-up insurance.

12
Contractor Wrap-Up Program
  • Wrap-up insurance can provide
  • Workers comp
  • General liability
  • Architects and engineers professional liability
  • Builders risk
  • Excess liability
  • Pollution liability
  • Specialized insurance
  • Longshoremens and harborworkers insurance
  • Railroad protective liability insurance
  • Wrap-up insurance does not provide
  • Automobile liability
  • Insurance on contractors tools and equipment

13
Contractor Wrap-Up Program
  • Two types of wrap-up insurance
  • Guaranteed Cost Plan
  • Simplest form of plan
  • Premiums remain constant regardless of claims
    paid out.
  • Common for small to medium-sized businesses
  • Loss-sensitive Plan
  • Premiums dependent on policyholders claims paid
    or losses
  • Returns a refund for low losses
  • Charges additional premium for high losses

14
Dollars in millions Dollars in millions Dollars in millions Dollars in millions Dollars in millions
Project Name and Location Total project cost Insurance Costs Insurance Costs Insurance savings
Project Name and Location Total project cost Traditional Wrap-up Insurance savings
Blue Water Bridge, Michigan 97.2 10 7.1 2.9
Boston Central Artery Tunnel, Massachusetts 10,800 1,030 765 265
I-15, Salt Lake City, Utah 1,600 52.2 22.3 29.9
CTA Green Line Rehabilitation Chicago, Illinois 408.7 32.5 21.0 11.5
Hudson-Bergen Light Rail (Initial segment) 992 20 11 9
Tri-Met, Westside Light Rail Portland, Oregon 952 27.1 17.2 9.9
Transportation Infrastructure, Advantages and Disadvantages of Wrap-Up Insurance for Large Construction Projects, U.S. General Accounting Office, June 1999, http//www.gao.gov/archive/1999/rc99155.pdf Transportation Infrastructure, Advantages and Disadvantages of Wrap-Up Insurance for Large Construction Projects, U.S. General Accounting Office, June 1999, http//www.gao.gov/archive/1999/rc99155.pdf Transportation Infrastructure, Advantages and Disadvantages of Wrap-Up Insurance for Large Construction Projects, U.S. General Accounting Office, June 1999, http//www.gao.gov/archive/1999/rc99155.pdf Transportation Infrastructure, Advantages and Disadvantages of Wrap-Up Insurance for Large Construction Projects, U.S. General Accounting Office, June 1999, http//www.gao.gov/archive/1999/rc99155.pdf Transportation Infrastructure, Advantages and Disadvantages of Wrap-Up Insurance for Large Construction Projects, U.S. General Accounting Office, June 1999, http//www.gao.gov/archive/1999/rc99155.pdf
15
Contractors Equipment Floater
  • Common insurance on special equipment for
    construction projects that is not permanently
    tied to one location
  • Types of equipment covered
  • Loaders
  • Dozers
  • Cranes
  • Excavators
  • Concrete Pumpers
  • Backhoes
  • Asphalt Machinery
  • Drill Rigs
  • Well Servicing Equipment
  • Forklifts
  • Misc. Tools Equipment
  • Equipment has tendency to walk off during the
    night

16
Construction Builders/All RiskInsurance
  • BUILDER'S RISK  Insurance against loss to
    buildings or structures in the course of
    construction.
  • ALL RISK  Insurance against loss or damage to
    property arising from any accidental cause,
    except such as may be specifically excluded

17
Options
  • Estimated Maximum Loss of 750M
  • Leverage Motivas existing property coverage with
    Oil Insurance Limited
  • Disadvantages
  • Only 1 OIL limit of 250 million for combined
    operational and CAR event
  • Requires commitment to OIL for life of project
    reduces flexibility
  • Stand-alone CAR program
  • Advantages
  • More coverage
  • Use of captives

18
Decision
  • Standalone Coverage
  • Limits
  • 750 million, except 250 million in respect of
    windstorm and flood
  • 10 million for existing property.
  • Deductible
  • 10 million any one occurrence

19
Project Insurance ProgramsConstruction All Risk
- Markets
  • Market Line Size
  • Swiss Re (Lead) 20.00
  • Noble (Shell Captive) 20.00
  • Stellar (Saudi Aramco Captive) 20.00
  • Liberty 10.00
  • Zurich 7.50
  • AIG 5.00
  • Starr Tech 4.00
  • Arch 2.50
  • Navigators 1.00
  • SCOR 4.00
  • Lancashire 2.00
  • O'Farrell 2.00
  • Catlin 2.00
  • Total 100.00

20
Marine Cargo Insurance...Who needs that??
21
Marine Cargo Insurance Summary
  • The worlds integrated Global Economy demands
    movement of goods across borders to fuel economic
    growth and stability.
  • As Emerging Markets in Latin America, Europe,
    Asia, Africa, and the rest of the world begin to
    demand more goods from across the globe the
    volume of international cargo shipments increase.
  • Although physical damage on transit claims may
    not be a common problem. Importers or exporters
    must keep in mind that over 50 voyages a year
    encounter heavy weather where shipping containers
    are lost overboard.
  • Most risks are difficult for the owner of the
    goods to manage directly. This is because the
    shipment will be given into the care, custody and
    control of third parties who will limit their
    liability for loss or damage to those goods

22
Marine Cargo Insurance Cont.
  • Marine Cargo Insurance is different then other
    liability and property coverage. The scope is
    international, and broad. Also, extension of
    coverage is industry specific and broader then
    other lines of insurance.
  • Marine insurance clauses are not filed, nor
    regulated by state laws. Also insurance can be
    offered for one shipment or multiple shipments.
  • The premium cost of covering the cargo is based
    on individual experience, shipment volume, mode
    of transit, and value shipped. The underwriter
    determines what premium will be required to meet
    the anticipated losses and expenses on account.
  • The premium can also be impacted as the shipper
    includes additional coverage such as processing
    in a foreign country, how damage to cargo could
    affect future cash flows of a firm, exhibition
    coverage at sales conventions in foreign
    countries overseas, and temporary storage
    overseas.

23
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24
Risks
  • Theft, pillage or hijack
  • Mistakes in transportation...
  • I.E. dropping, rough or inappropriate handling
  • Accident to the carrying conveyance...
  • I.E. vessel sinking, aircraft crashing or vehicle
    fire, road traffic accident or overturning
  • Exposure to rain or salt water
  • Exposure to unusual variations in temperature

25
Example of a Motiva Insurance Package
  • Coverage
  • Physical Loss of or Damage occurring during
    transit from suppliers' premises anywhere in the
    World until safe unloading at the Project Site
  • Loss or impairment of Operating Margin triggered
    by a covered property loss.
  • Term October 15 07 to June 01 10
  • Limits
  • 70 million any one vessel, conveyance and/or
    location
  • indemnification up to 480 million, capped at 50
    million per month, for a 24 month indemnity
    period.
  • Deductible
  • Property damage - 100,000 each and every loss
  • DSU - 45 days in the aggregate.

26
The Port of Houston
27
Port of Houston Summary
  • Port of Houston is the port of the fourth-largest
    city in the United States.
  • The port is a 25-mile-long complex of diversified
    public and private facilities located a few
    hours sailing time from the Gulf of Mexico.
  • It is the busiest port in the United States in
    terms of foreign tonnage, second-busiest in the
    United States in terms of overall tonnage, and
    tenth busiest in the world.
  • Made up of the Houston Ship Channel and Galveston
    Bay. It is made up of the port authority, and
    the 150-plus private industrial companies along
    the ship channel. Many oil companies have built
    refineries on the channel where they are
    protected from the Gulf of Mexico.

28
Port of Houston Quick Facts (2006)
  • 6th largest in the world
  • 1st in US in foreign tonnage
  • 2nd in total tonnage
  • Home of the worlds 2nd largest petrochemical
    complex
  • More then 200 million tons of cargo moved through
    the port.
  • Leads the nation in environmental protection. It
    is the first US port to be certified as ISO14001.
  • Supports 785,000 jobs in Texas
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